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Qantas has pulled the plug on an ambitious $200 million e-business outsourcing manoeuvre, axing a contract with IBM six years before the arrangement was due to expire.
Late last year the airline cancelled a contract with IBM to build and operate a company-wide information system known as EQ. The contract, signed in June 2002, was expected to run for 10 years.
Neither IBM nor Qantas would comment.
The original three-way arrangement with IBM, PricewaterhouseCoopers and Oracle was lauded as a new "vision for the technology-based working environment at Qantas" when announced four years ago.
The plan was to build new human resources, payroll and financial systems based on Oracle software.
The original contract to build the systems was awarded to PricewaterhouseCoopers Consulting and inherited by IBM when it acquired that consulting business. IBM was also expected to supply infrastructure and hosting services.
The e-enablement of administration, which was the key goal of EQ, was expected to save $25 million.
But little is left of the original plan. IBM is understood to have been contracted to provide some support services until later this year, but the attempt to shift the job of running the vital applications away from the airline has been abandoned.
The project is understood to have run into trouble early last year after the human resources element was completed. People close to the project say deadlines started to slip as attempts were made to map the new finance application against the complex Qantas corporate structure.
The cancellation of the contract is a major blow for IBM, which has been seeking to stress its service capabilities in recent years and to interest customers in handing over more of their operations.
However, the computer company retains its infrastructure outsourcing contract with Qantas.
That $650 million, 10-year contract to run the airline's data centre and computer server systems still has eight years to run. It was negotiated separately from the EQ project.
The EQ project has been closely monitored by other companies that need to replace legacy applications. The build-and-operate model adopted by Qantas was seen as an alternative to an in-house development.
According to the Qantas 2003 annual report, EQ was one element of a computer operations, network and telecom strategy designed to enable business change and simplify technology infrastructure by retiring high-cost components.
The airline also articulated its desire to outsource commodity services to managed service providers "where possible and practical".
The project was one of the initiatives unveiled by Fiona Balfour after she became chief information officer at Qantas. Late last year Ms Balfour announced she would leave the airline in March.
No replacement has been announced. Michael Mitchell, whose roles at Qantas have included chief IT architect and planner, is a strong internal candidate.